Fifth Third Bancorp was among bidders that submitted indications of interest to the Federal Deposit Insurance Corp. to acquire First Republic Bank over the weekend, three sources briefed on the auction process said.
JPMorgan Chase & Co. on May 1 announced an agreement to acquire First Republic after regulators took possession of the embattled bank. JPMorgan Chairman and CEO Jamie Dimon described the deal as the end of the liquidity crunch among US regional banks. The banking sector has experienced turbulence since March with the failures of Silicon Valley Bank and Signature Bank.
Fifth Third was a strong contender seeking to buy First Republic until the auction process ended on the evening of April 30, two sources said.
The FDIC received indications of interest from four banks — PNC Financial Services Group Inc., Citizens Financial Group Inc., JPMorgan and Fifth Third — on the afternoon of April 28, the first source said. The process was opened up to other bidders during the weekend, including banks and private equity firms, with binding bids due at midday on April 30. The FDIC then asked for the final and best offer from each of them by 7 p.m. ET on April 30, the source added.
JPMorgan's bid was selected as the winner because it proposed buying the entire bank, and the deal was structured in a way that the Federal Reserve Board, the FDIC board and the Treasury Department did not need to work out a "system risk exception" to cover the uninsured deposits, a designation they gave to Silicon Valley Bank and Signature Bank, the first source said.
JPMorgan assumed all deposits of First Republic, including all uninsured deposits, and acquired substantially all assets, according to the California Department of Financial Protection and Innovation. The California DFPI seized First Republic and appointed the FDIC as the receiver, according to a May 1 press release.
Guggenheim Securities LLC advised the FDIC to run the auction process, led by Jim Millstein, Guggenheim's co-chairman, and James Wigand, a senior adviser at the firm. They were previously the founder and a partner at Millstein & Co. LP, which Guggenheim acquired in 2018.
Millstein was previously the chief restructuring officer at the US Department of the Treasury, where he supervised the restructuring and recapitalization of finance and insurance company American International Group Inc. that was completed in January 2011. Wigand previously served at the FDIC as a director at the Office of Complex Financial Institutions.
Guggenheim started the relationship with the FDIC around mid-March, after the fallout of Silicon Valley Bank, the first source said.
FDIC and Fifth Third did not respond to requests for comment.